Bemis Company 2007 Annual Report - IR Solutions

(in millions) 2007 2006 2005
Identifiable Assets: (2)
United States $1,677.7 $1,706.6 $1,723.2
Canada 5.7 21.2 31.9
Europe 441.7 419.0 370.5
South America 830.1 696.1 622.9
Other 75.5 76.5 69.7
Total $3,030.7 $2,919.4 $2,818.2
(1) Operating profit is defined as profit before general corporate expense, interest expense, income taxes, and minority interest.
(2) Identifiable assets by business segment include only those assets that are specifically identified with each segment’s operations.
(3) Corporate assets are principally prepaid expenses, prepaid income taxes, prepaid pension benefit costs, fair value of the interest
rate swap agreements, and corporate tangible and intangible property.
(4) Net sales are attributed to countries based on location of the Company’s manufacturing or selling operation.
Note 13 – COMMITMENTS AND CONTINGENCIES
The Company is involved in a number of lawsuits incidental to its business, including environmental related litigation.
Although it is difficult to predict the ultimate outcome of these cases, management believes, except as discussed below, that any ultimate
liability would not have a material adverse effect upon the Company's consolidated financial condition or results of operations.
The Company is a potentially responsible party (PRP) in twelve superfund sites around the United States. The Company
expects its future liability relative to these sites to be insignificant, individually and in the aggregate. The Company has reserved an
amount that it believes to be adequate to cover its exposure.
Dixie Toga S.A., acquired by the Company on January 5, 2005, is involved in a tax dispute with the City of São Paulo, Brazil.
The City imposes a tax on the rendering of printing services. The City has assessed this city services tax on the production and sale of
printed labels and packaging products. Dixie Toga, along with a number of other packaging companies, disagree and contend that the city
services tax is not applicable to its products and that the products are subject only to the state value added tax (VAT). Under Brazilian
law, state VAT and city services tax are mutually exclusive and the same transaction can be subject to only one of those taxes. Based on
a ruling from the State of São Paulo, advice from legal counsel, and long standing business practice, Dixie Toga appealed the city services
tax and instead continued to collect and pay only the state VAT.
The City of São Paulo disagreed and assessed Dixie Toga the city services tax for the years 1991-1995. The assessments for
those years are estimated to be approximately $61.9 million at the date the Company acquired Dixie Toga, translated to U.S. dollars at the
2007 year end exchange rate. Dixie Toga challenged the assessments and ultimately litigated the issue. A lower court decision in 2002
cancelled all of the assessments for 1991-1995. The City of São Paulo, the State of São Paulo, and Dixie Toga have each appealed parts
of the lower court decision. The City continues to assert the applicability of the city services tax and has issued assessments for the
subsequent years 1996-2001. The assessments for those years for tax and penalties (exclusive of interest) are estimated to be
approximately $39.4 million at the date of acquisition, translated to U.S. dollars at the 2007 year end exchange rate. In the event of an
adverse resolution, these estimated amounts for all assessments could be substantially increased for interest, monetary adjustments, and
corrections.
The Company strongly disagrees with the City’s position and intends to vigorously challenge any assessments by the City of
São Paulo. The Company is unable at this time to predict the ultimate outcome of the controversy and as such has not recorded any
liability related to this matter. An adverse resolution could be material to the consolidated results of operations and/or cash flows of the
period in which the matter is resolved.
The Secretariat of Economic Law (SDE), a governmental agency in Brazil, initiated an investigation into possible anticompetitive
practices in the Brazilian flexible packaging industry against a number of Brazilian companies including a Dixie Toga
subsidiary. The investigation relates to periods prior to the Company’s acquisition of control of Dixie Toga and its subsidiaries. Given
the preliminary nature of the proceedings the Company is unable at the present time to predict the outcome of this matter.
The Company and its subsidiary, Morgan Adhesives Company, have been named as defendants in thirteen civil lawsuits related
to an investigation that was initiated and subsequently closed by the U.S. Department of Justice without any further action. Six of
these lawsuits purport to represent a nationwide class of labelstock purchasers, and each alleges a conspiracy to fix prices within the selfadhesive
labelstock industry. On November 5, 2003, the Judicial Panel on MultiDistrict Litigation issued a decision consolidating all of
the federal class actions for pretrial purposes in the United States District Court for the Middle District of Pennsylvania, before the
Honorable Chief Judge Vanaskie. On November 20, 2007, the Court granted plaintiffs’ motion for class certification. Defendants have
petitioned the Third Circuit Court of Appeals to hear an appeal of the district court’s decision granting class certification. At this time, a
discovery cut-off and a trial date have not been set. The Company has also been named in three lawsuits filed in the California Superior
Court in San Francisco. These three lawsuits, which have been consolidated, seek to represent a class of all California indirect purchasers
of labelstock and each alleged a conspiracy to fix prices within the self-adhesive labelstock industry. Finally, the Company has been
named in one lawsuit in Vermont, seeking to represent a class of all Vermont indirect purchasers of labelstock, one lawsuit in Nebraska
seeking to represent a class of all Nebraska indirect purchasers of labelstock, one lawsuit in Kansas seeking to represent a class of all
Kansas indirect purchasers of labelstock, and one lawsuit in Tennessee, seeking to represent a class of purchasers of labelstock in various
jurisdictions, all alleging a conspiracy to fix prices within the self-adhesive labelstock industry. The Company intends to vigorously
defend these lawsuits.
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